Data usage wants to be free

How much data do you use each month from your mobile and home internet providers?

Is it just me or do you find data caps both annoying and confusing? How much is a gigabyte of data? How do I know how much data I’m using when I check email, when I stream music, or when I watch a movie? Do I really have to keep checking my provider’s site to see how much data I’ve already used?

I don’t even control all the data that is used by my account. What about all those pesky internet hackers that probe my home network? What about all those videos and ads that play automatically when I open a web page to read news?

I’m all for free enterprise and businesses making profits for the services they provide, but….

Unfortunately it has become the norm for cellular providers and a few home internet service providers to cap data because it is the key metric for how they price subscription plans in the market. To be fair, if every subscriber started streaming movies endlessly then it would overwhelm the capacity of the network and no one would be happy. But I wonder just how realistic that argument is from actually happening.

Right now the world of digital content is expanding and changing rapidly and both content providers and bandwidth providers are grabbing for their share of the profit pie. Consumers are rapidly moving to subscriptions for the content they want to consume from providers like Netflix, Amazon, and Sling. But the cost of getting to that content is more than the subscription price when you have to pay additional fees for the bandwidth usage. The price of the content subscription is customer friendly because it’s easy to understand. I pay a fixed amount each month and I can watch as much or little content from the provider that I want to. But the price from the bandwidth providers is fuzzy. I get a set amount of gigabytes from provider each month but I have no way to really know how much data I’m using and the measurement requires continual work on my part. Yuck.

“On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life.

On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time.

So you have these two fighting against each other.”

We are in a similar place now with data content and data usage. Data content wants to be expensive because it holds a value to the consumer. But data usage wants to be free because providers will start to lower the price and provide higher data allowances to compete with each other. Data usage also wants to be free because the consumer can’t easily meter it and in reality the usage is not what the consumer really wants to buy. Without the attractive content there would be no usage!

Solutions will evolve.

A few solutions in the right direction already exist. Rather than charge data overage fees some providers reduce the speed/bandwidth when a subscriber reaches a set threshold. This is a decent compromise for not financially penalizing a customer for overages but yet keeping a limit on overall capacity of the network.

But I believe to get to the best solution that the data providers need to be judged differently. Today, the providers are judged based on new subscribers each quarter. This is what drives all the discounts for new subscribers that last for a 12-month promotional period. What’s perplexing about this is that new subscribers are the least profitable! They have a high cost of acquisition and haven’t spent enough money with the provider to cover their cost. Why does the system reward providers for having more of the least profitable customers?

What would happen if the all the providers offered their best pricing to loyal customers? What if the price for loyal subscribers was tiered such that it dropped the longer the customer subscribed? What if the system judged the providers on customer loyalty and total subscriptions instead of new subscriptions? A system like that rewards the most profitable customers and allows the providers to focus more on quality service rather than eye-catching promotions. Data usage fits into customer loyalty when the data service is reliable, fast, and available. More profits come from customer loyalty, not confusing customers with complex data metering plans.